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  1. #1
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    Default CMO - Colonial Motor Company

    All these years and I can't find a thread on these... surely someone must own some shares somewhere? Some poor person out there waiting for an analyst to start covering them again after years (decades?) of neglect?

    Thought I would read their result in a quiet moment. Interested to see that they have found trading in the past 4-5 months to be tougher than anticipated.

    Actually, it's not like they're small to be so un-mentioned. They have a market cap of $73.6m and revenue of $434m...

    That aside, they produce impressively low trading margins - less than 2%. They also trade at only about two-thirds of their net asset value ($3.48/share), which is mainly property based. I can only presume they have a very tight share register that prevents anyone taking this over and extracting a little more value. The shares seem to have gone sideways through the $2-$3 range for over 10 years, so perhaps now (at $2.25) might be at least close to a good price... though you wouldn't want to buy them for the thrill.

    Might have to look deeper at the full Annual Report some time.

  2. #2
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    Quote Originally Posted by Lizard View Post
    All these years and I can't find a thread on these... surely someone must own some shares somewhere? Some poor person out there waiting for an analyst to start covering them again after years (decades?) of neglect?

    Thought I would read their result in a quiet moment. Interested to see that they have found trading in the past 4-5 months to be tougher than anticipated.

    Actually, it's not like they're small to be so un-mentioned. They have a market cap of $73.6m and revenue of $434m...

    That aside, they produce impressively low trading margins - less than 2%. They also trade at only about two-thirds of their net asset value ($3.48/share), which is mainly property based. I can only presume they have a very tight share register that prevents anyone taking this over and extracting a little more value. The shares seem to have gone sideways through the $2-$3 range for over 10 years, so perhaps now (at $2.25) might be at least close to a good price... though you wouldn't want to buy them for the thrill.

    Might have to look deeper at the full Annual Report some time.
    Liz

    I've mentioned CMO a few times over the years (without buying), i've always like the fact there NTA/NAV was backed largely by land

    I've worked somewhere in the past which looked after the books etc, pretty much a family business & tight structure

    Margins in this industry are razor thin

    Fairly consistent dividend payer too
    Disc holding - AZY, ENR, GAL, LEG, PRX, SES

  3. #3
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    The Gibbons family control at least 36.8%

    PC & FS Gibbons 1,933,064 6.9%
    AD & SB Gibbons & LB Rogerson 1,249,849 4.5%
    Estate RC Gibbons, NL, BR & JP Gibbons & PL Bennett 1,231,542 4.4%
    Florence Theodosia Gibbons 1,096,365 3.9%
    Peter Craig Gibbons 905,354 3.3%
    Faith Sara Gibbons 890,945 3.2%
    Estate R C Gibbons, Deceased 565,635 2.0%
    EC, JP & GD Gibbons, CG Harrison & MA Barton 413,550 1.5%
    MA & LE Gibbons & AK Cook 404,074 1.5%
    JP & DM Gibbons & PL Bennett 382,121 1.4%
    Graeme Durrad Gibbons 343,158 1.2%
    May Alice Gibbons 302,574 1.1%
    Robert Durrad Gibbons 294,836 1.1%
    Nancy Lucy Gibbons 283,068 1.0%
    Stuart Barnes Gibbons 230,486 0.8%
    Elsie Craig Gibbons 225,897 0.8%



    CMO has 10% return from dividends at least, so at the current price it is a great income stock.

    Longer term, you would want the board to unlock some of the NTA value, two ways could be:

    - Sell off all the property to external buyers and lease it back off them on 10 -20 year leases

    - Create a separate company that owns all the land and leases it back to CMO, then potentially list this company on the exchange, as a separate entity. As it would be a property company, if it still trades below NTA, huge potential for a takeover by one of the listed trusts.


    NTA on results is $4.21 down from $4.38 in 2009, but still way above the last price at $2.25.

    Property plant and equipment make up $3.26 of this NTA.

    Strip this out you have $0.95 NTA trading at $2.25, returning 10% a year minus the increased cost of leasing. Does any one have a break down on the worth of each of their 12 properties, 2009 Annual Report does not give that detail.
    ~ * ~ De Peones a Reinas ~ * ~

  4. #4
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    Some fairly old-fashioned names on that list, Silverlight. What's your consultancy rate? Perhaps you should go door knocking and see if they want some help to extract value...

  5. #5
    Adventurer Silverlight's Avatar
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    Quote Originally Posted by CMO Website
    The current major shareholdings in CMC are with individual members of the wider Gibbons Family, who collectively hold over 60% of the Company shares.
    That is way higher than I was expecting!

    The holdings are all old money, and would probably follow an adage similar to that of Mark Twain (aka Samuel Langhorne Clemens) if you gave the suggestion of extracting value, through splitting up the assets.

    Quote Originally Posted by Mark Twain
    I am more concerned with the return of my money than the return on my money
    Last edited by Silverlight; 17-08-2010 at 09:45 AM. Reason: gave the wrong man credit!
    ~ * ~ De Peones a Reinas ~ * ~

  6. #6
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    Old money....

    I am curious if they are descended from John Gibbons of Huia

    (An intriguing story of business, wealth and family in early NZ)

  7. #7
    percy
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    Quote Originally Posted by Silverlight View Post
    That is way higher than I was expecting!

    The holdings are all old money, and would probably follow an adage similar to that of Mark Twain (aka Samuel Langhorne Clemens) if you gave the suggestion of extracting value, through splitting up the assets.
    From memory either GPG or Brierly were shareholders and had similar ideas as you have.I note they are no longer there.I suspect the Ford agency is very difficult with Hyandi expected to take over the No.1 position from Toyota in the next few years.With property market also difficult,the Gibbons family may not be receptive to new ideas.You may have to wait for another generation or two of Gibbons for movement.A good few years ago Hutchinson Motors in Ch-CH were offered the Toyota agency but Ford would not allow a Ford dealer to have another agency.In Auckland Bob MacMillian gave up the Ford agency or sold it and took on BMW.
    Last edited by percy; 17-08-2010 at 12:04 PM.

  8. #8
    Adventurer Silverlight's Avatar
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    Quote Originally Posted by CMO Website
    Guinness Peat Group plc (GPG) made a takeover offer for CMC in October 1995. Among the sellers who enabled GPG to acquire 33.9% were some original Gibbons Family shareholders. As part of a plan to maximise value to shareholders, Directors resolved to rationalise the Company's non-dealership property holdings, repay the surplus funds to shareholders and focus the Company on its core motor trade activities.

    In June 1997, GPG sold its shares to the MBM Group of Companies which have interests in the Motor Industry in Malaysia. MBM Group sold all remaining 24.9% stake on the market in May 2003 to a large number of individual shareholders and a few institutional holders.
    So some Gibbons sold out to GPG, GPG couldn't complete the deal, sold their stake off to MBM, who sold it back to the Gibbons.

    Attached is top holders from 1996, 1997, 2001 & 2003.

    The Gibbons never sold out everything, if someone has access to announcements, we could probably work out if MBM sold their stake at a profit or loss, although they would have had healthy dividends all the way through as well.
    Attached Files Attached Files
    ~ * ~ De Peones a Reinas ~ * ~

  9. #9
    percy
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    Hope Gibbons & co were related.They started out importing bikes and were also motor accessery wholesalers.

  10. #10
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    A strong FY result from CMO. Not surprised to see sellers cleared out at $2.35, as that leaves it on a yield of over 8% plus imputation. Also looking good on pretty much any other ratio, although hard to guess at outlook.

    Interesting that the sales in Christchurch were stronger than in Wellington and Auckland "despite the earthquake"... wonder if there was an element of "because of the earthquake"? Seems possible to argue that one either way.

  11. #11
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    I own some ... I have alway struggled with a valuation methodology (are they an automotive company, are they a property company; is it really an equity investment, is it a type of fixed interest pref).

    However, with the yield and commercial property backed NTA ... I don't struggle too hard.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  12. #12
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    Quote Originally Posted by Enumerate View Post
    I own some ... I have alway struggled with a valuation methodology (are they an automotive company, are they a property company; is it really an equity investment, is it a type of fixed interest pref).

    However, with the yield and commercial property backed NTA ... I don't struggle too hard.

    To judge the relative worth of investments, I always think it is worth looking around at the alternatives. The car market has never been more dynamic. In the next few years, who knows whether Toyota, Hyundai, Ford or even former bankrupt GM will emerge with the leading market position in this country? However, there is one NZX auto market investment you can make where you don’t have to second guess which way the market will go: Turners Auctions.

    Turners are the only nationwide sales network that deals in all makes and models. In recent years TUA have recovered from the delusion that they could take the West Coast of the United States by storm. They have weeded out fraud in their senior management with new procedural systems. And they have got back to their basics: the NZ pre-owned vehicle market. TUA are probably one of the dullest investments on the NZX you can make. Yet being boring is often a flag to me of an under the radar investment opportunity.

    Unlike Colonial, Turners have sold and leased back their premises. There is no property to add comfort to a TUA investment. However, I would question some of that Colonial Property value. A property only has contestable value equal to its best alternative use. I am not sure if aging ex car showrooms have a great alternative value. Alternative car franchises tend to bulldoze and rebuild when setting up a new car sales franchise. And it is doubtful that Ford would let a significant part of its dealer network disappear off to a competitor anyway. IMO the break up value of CMO is a moot issue. The underlying Ford dealer land certainly has value though.

    Ironically while Brierley couldn’t unlock any hidden value that might have existed within Colonial, he is almost certainly going to be responsible for unearthing any hidden value that exists at TUA. This is thanks to Brierley’s vehicle GPG, which is in the process of being broken up, holding a strategic (19.4%) stake in TUA.

    According to some newspaper summaries, TUA has the highest gross dividend yield of any share on the NZX. In fact this is an historical distortion, because of a 6cps bonus special dividend paid out on 7th April 2011. Even so at $1.37, TUA is on an historic normalized dividend (11cps) gross yield of 11.5%. Pretty useful.

    In summary, what is wrong with CMO as an income investment proposition? In the grand scheme of things not much. But why would you invest when there is an alternative out there which is just that bit more attractive?

    SNOOPY
    To be free or not to be free. That is the cash-flow question....

  13. #13
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    Be int to know what % of the car market Trade Me controls,surely a threat to Turners.

  14. #14
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    A property only has contestable value equal to its best alternative use. I am not sure if aging ex car showrooms have a great alternative value.
    I don't think the value lies in the buildings though. I don't know what values CMC shows in its books for properties but if their Taranaki St, Wellington property is typical, it's the land, and its location - largely utilised for the used car yard - where the real value lies.

    Disc: Not holding CMC.

  15. #15
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    Market update the other day did not cause much interest, but worth a note:
    On 20 February 2012, when the board announced the company’s result for the six months to 31 December 2011, we commented that we did not expect the result for the next six months to be as good. Trading in the second half of the year has been better than we anticipated when we made this comment.
    If they match first half as implied, they'd be looking at somewhere near $12m NPAT in trading profits, or about 50% increase over prior year. Maybe forward PE of 8.5 at offer of $3.15 per share. A good chance of an increase to the dividend to a yield of around 7% plus imputation.

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